Bullish one day, bearish the next

Detma is still positioned for the deflationary trade although it has reduced its shorts in the Euro.  The model has a methodology for taking money off the table, or reducing exposure, when it assesses a trend as being extreme in behavior.  Through its calculation of the trend Betas it derives a Measure of Trend Intensity (MTI).  This MTI has the capacity to reduce 40% of the exposure to a position even though the model signals are still strongly in play. 

Detma has reduced its shorts in EURUSD, EURJPY, EURCHF to 60% and has gone 100% long EURAUD.  Does this tell me that the EURO has bottomed?  Not at all, just that the Detma system thinks that it's a good time to lock in some profits.  Doing this never disappoints me because it usually happens after a good run and it reduces the open profits risk.  The EURJPY chart shows the MTI buying back 40% of the exposure even though both D6 and D12 are strongly short.

The USDCHF chart at left is another example of the MTI in play.  Here it has not been crossed so it has not traded, but note that it will sell back 40% of the exposure if USDCHF touches 1.1380 or lower.  This compares to the D6 and D12 reversals which are still way off because of the strength of the trend. 

The AUDUSD was very strong on Wednesday and Thursday.  It was actually great to buy the dip at .8300 and see profits realised through something going up for a change!.  Its failure above 0.8500 however took the shine out of the rise from .8300.  Now it seems that we could well have finished the 4th wave discussed May 26.  In Elliott Wave Theory (EWT) terms we may be in the beginning of a new cycle down.  That is, wave 5 down targeting 0.7500 may now be in play. 

Since wave 5 is of at least Primary Degree it will be substantial in both amplitude as well as sentiment.  You can expect things to look very bleak at the bottom but be prepared to buy the AUDUSD at .7500 with your ears pinned back.  This is because all of this fall from .9400 is correcting a higher Cycle Degree rise from the lows of .6000 to parity plus eventually.

The European Union is making valiant efforts to restructure itself away from the USD hegemony that it has been ruled by since the end of WWII.

The most recent act by them has been to push for greater oversight and regulation of the major credit rating agencies.  It just so happens that the big three, S&P, Moodys and Fitch are all American.  As a sovereign nation would you really want your well being to be determined by an organisation, based in another country, and which has been shown to be lacking in stature by its selling of AAA ratings to the highest bidder during the sub prime crisis - give me  a break.  So, in what effectively is the lopping off of the second head of the 9 Headed Hydra known as the Washington Consensus, the Europeans are going to create a new body to be called the European Securities Markets Authority to oversee these agencies.  Eventually they will develop their own credit rating agencies. 

The EURUSD also showed strength yesterday but failed above 1.2300.  Like the Aussie, the Euro was bullish one day, bearish the next.   This consolidation between 1.2100 and 1.2400 looks to me like an abcde triangle for a wave 4 in the third wave down.  In a nutshell then, there is more downside to the Euro and 1.1000 looks to be on the cards.

Position wise I was happy being long yesterday, but now feel that the downside may take precedence for a while.  I'm short AUDUSD and EURUSD but very wary of .8550 and 1.2350 respectively.

Frank